This page has been archived and commenting is disabled.

A Rare Glimpse Into The Fed's Discount Window Courtesy Of The Brewing Lehman-Barclays Scandal

Tyler Durden's picture


For those interested in the implications of our observations of the Barclays-Lehman transaction as they pertain to the Federal Reserve's discount window, we recommend skipping to Part 2.

Part 1: The Lehman "Blue Light Special"

It is becoming increasingly likely that Barclays will have to pay a cool $5 billion (at least) in additional consideration to the Lehman estate, after the Official Committee of Unsecured Creditors came out yesterday with a hefty joinder piece to the debtor's motion that Barclays materially misrepresented and, in essence, stole $5 billion or more from under the noses of both Lehman Brothers Holdings and its Creditors, all as the megalomaniacal Judge Peck was trying to ram the largest prearranged stalking horse bankruptcy through, in the shortest (im)possible amount of time, just so he could print "Judge Peck  - Greatest Restructuring Judge in the World" t-shirts at the Bowling Green sweat shop just off NY Southern Bankruptcy court. As it often happens, the exposure of this alleged fraud was just a matter of time, and it would appear that Bob Diamond who was counting on a meek opposing creditor committee, and complicit debtor (which he got for a good 12 months, courtesy of a toothless Official Creditor Committee ) is about to pay through the nose for what he thought at the time was the greatest rip off since Bear Stearns.

A filing by the OCC provides a very good summary of the five purported axes of scammery that the Barclays' pickpockets were hoping to effectuate under the "End is Nigh" guise of systemic collapse, and the need for a quick transaction closing, no matter what the cost to Lehman:

  • Implied $5 Billion Discount. Unbeknownst to the Court or the Committee, early in the negotiations, Barclays and the Lehman Sellers agreed to give Barclays a $5 billion discount from the transferred assets' book value. Indeed, evidence suggests the $70 billion figure contained in the Asset Purchase Agreement ("APA") was not the value on the Lehman Sellers' books at all. Instead, it was a "negotiated" number with an embedded $5 billion discount. This discount was not disclosed in any of the transaction documents given to the Court.
  • Significant Structural Changes To Sale Transaction. The APA contemplated Barclays would acquire the North American broker dealer operations by purchasing certain of its assets and the liabilities relating to those assets. However, on September 17, 2008, the Federal Reserve Bank of New York (the "Fed") insisted that Barclays assume the Fed's obligations to provide financing to LBI. The Fed had financed LBI through a repurchase agreement (the "Fed Repurchase Agreement"). Barclays agreed to step into the Fed's position and entered into its own repurchase agreement with LBI (the "Barclays-LBI Repurchase Agreement"), which replaced the Fed Repurchase Agreement. As is common in financings of this type, the Fed Repurchase Agreement contained an approximately $4.4 to $5 billion cushion or haircut in valuing the assets in relation to the liabilities. Barclays agreed to provide $45.0 billion in funding, which LBI would secure with assets worth at least $50 billion. After executing and filing the APA, the parties ultimately decided to transform the Barclays-LBI Repurchase Agreement into an asset sale, with Barclays keeping all of the collateral pledged under the Fed Repurchase Agreement (the "Fed Portfolio") — which contained not less than $5 billion additional collateral beyond the $45.0 billion that Barclays was required to advance, i.e., the haircut.
  • Mad Dash For Unencumbered Assets. Not satisfied with the $5 billion cushion, beginning on Friday September 19, 2008, Barclays demanded that the Lehman Sellers transfer billions of dollars more additional assets. The search for these assets continued after the Sale Hearing, and included (a) no less than $1.9 billion of unencumbered securities in the "non-actionable" box, (b) 15c3 Securities valued at between $750 million and $800 million and (c) an undisclosed amount of collateral supporting the OCC Accounts and other exchange-traded accounts (valued at approximately 2.3 billion).
  • Overstated Liabilities. The evidence also reveals that Lehman and Barclays intentionally overstated the Cure and Compensation Liabilities to foster the impression that Barclays was assuming greater liabilities. The APA Scheduled these amounts at $2.25 billion and $2.0 billion respectively. In reality, the estimates of the liabilities were only approximately $1.3-$1.7 billion.
  • Conflicts Of Interest In Negotiations. The Lehman Sellers' teams negotiating on behalf of the estates were steeped in personal conflicts of interest. Several of the negotiators for the Lehman Sellers either negotiated their employment agreements in the midst of the Sale Transaction negotiations or at least knew that they would be transferred to Barclays.

While we have discussed the first four issues previously on Zero Hedge, the last point deserves additional mention as it points to what could be potentially criminal superposition of personal over fiduciary interests by a select few "negotiators" on both the Lehman and Barclays side. From the filing:

Deposition testimony revealed the identity of a certain core group of individuals responsible for negotiating the Sale Transaction. On the Lehman Sellers' side, the negotiators included Bart McDade (President), Skip McGee (Managing Director - Head of Investment Banking), Mark Shafir (Co-Head of M&A), Alex Kirk (Advisor), Mark Shapiro (Head of Restructuring) and Dick Fuld (CEO). Steven Berkenfeld (Managing Director, Legal) executed the APA, the First Amendment and the Clarification Letter on the Lehman Sellers' behalf. Also involved from the Lehman Sellers were Paolo Tonucci (Treasurer), Ian  Lowitt (CFO), Mike Gelband (Head of Capital Markets), Eric Felder (Co-Head of Fixed Income) and Martin Kelly (Global Financial Controller). At the operations level, the Lehman Sellers' employees involved included James Hraska, Robert Azerad, and Alastair Blackwell. As explained below, many of these individuals became Barclays' employees following the Sale Transaction.

On the Barclays' side, the chief negotiators appear to have been Rich Ricci (Chief Operating Officer), Archie Cox (Chief Executive Officer - Americas), Michael Klein (Advisor), Gerard LaRocca (Chief Accounting Officer - Americas), Bob Diamond (Chief Executive Officer), and Jerry del Missier (President). Also involved were Patrick Clackson and Michael Keegan. David Petrie and John Rodefeld were involved at the operations level on the Barclays' side.

And this is the part that we recommend regulatory and legal enforcement officials focus on the most:

Many of the individuals negotiating the Sale Transaction on the Lehman Sellers' behalf became Barclays' employees following the closing. Indeed, McDade told Lowitt that Barclays deemed eight individuals, including Lowitt himself, as critical to the transaction. The other seven were Skip McGee, Ajay Nagpal, Tom Humphrey, Eric Felder, Gerald Donini, Mike Gelband and Hyung Lee.  The transfer of these eight individuals to Barclays apparently became a condition of the Sale Transaction closing  -- a fact disclosed during the Sale Hearing. McDade also worked for Barclays after the sale transaction. However, the significant bonuses paid to these employees after the Sale Transaction closed was not disclosed to the Court. As Alex Kirk explained, "[s]everal of my colleagues. . . who had signed employment agreements were resigning from [Barclays] and receiving large payouts upon their leaving the firm." Kirk, who McDade had re-hired to assist during the negotiations, also went to work with Barclays after the transaction. Because he had no written employment agreement with Barclays, he prevailed upon McDade to press Barclays for a bonus package because "[McDade] was on point for those sorts of issues with Barclays." [Blacked out text, presumably discussing bonus and compensation in detail]. Shapiro, Azerad, Blackwell, Hraska, and Kelly each joined Barclays as well.

The fact that both sides of the negotiating table were incentivized to produce the lowest possible transaction value for the Lehman Brokerage Sale to Barclays is certainly not representative of a fair arms-length negotiation: it demands a close scrutiny of each person's personal motivations and how these could have been misaligned with the interests of equity and bondholders of Lehman, whose interests Messrs McDade, McGee, Kirk, Shapiro, Azerad, Blackwell, Hraska, and Kelly have a much greater responsibility to, than to their own personal wallets. And if this means Lehman creditors pocket the difference of not only the $5 billion that may have been misappropriated by the Barclays-Lehman crack team, but also obtain a clawback of any improperly structured bonuses paid out to Lehman employees (if we need a Pay Czar, this is "non-earmuff" time) who were set on screwing over Lehman creditors at any and all cost, so be it.


Part 2: In which the Federal Reserve accepts 5,136 shares of bankrupt retailer Shaper Image as collateral (among others)


As part of the escalating fight between the Lehman estate and Barclays, one of the tangential benefits is a quick glimpse into what goes on at the Fed's discount window. As a result of the unsealing of tomes of data, information scourers will have a field day by going through the thousands of pages made public for the first time, that disclose not only Lehman's asset exposure, but also the amount of collateral proffered to Lehman by the NY Fed, by JPMorgan as primary custodian in a tri-party repo involving the Fed, and subsequently how this collateral was viewed by Barclays, as well as the measures it took to do all it can do minimize the amount of money it would have to pay to assume the collateral (which was declining in value every day).

In the week following the Lehman collapse, Barclays, as part of its Asset Purchase Agreement, was supposed to purchase (at first) $70 billion worth of assets (coupled with assuming the related $69 billion of debt): an amount which for liquidity-depleted Lehman was financing with overnight loans from both the NY Fed and from JPMorgan, which acting as a Fed agent, was involved in a tri-party repo transaction with Lehman Brothers. Yet Barclays did all it could to minimize the amount of cash it would have to pay JPM, as it suddenly realized the assets it had purchased were quickly dropping in value. A good summary is presented in the UCC filing:

On Friday night, for the first time as far as we know, the Bankruptcy Court was apprised of a different 'deal' between Barclays Capital and Lehman Brothers -- and that Barclays Capital was no longer purchasing $70 billion in assets and assuming $69 billion in related debt. But the Court was not apprised of the purchase that Barclays Capital now says it agreed to make. Instead, of the Court being told that Barclays Capital was purchasing approximately $49.7 billion in securities for $45 billion in cash, the Court was told that Barclays Capital was purchasing $47.4 billion in securities for $45.5 billion in cash. In addition, the Court was told that the reason for the change was a deterioration in market prices, an explanation that we now know to be incorrect .... [I]nasmuch as you ended up taking securities that had not been part of the 'Fed collateral' -- again, some were part of the 'Barclays Capital tri-party collateral' and still others were not financed by JPMorgan at all -- we believe that a full accounting should be done. It is altogether possible that the LBI estate and its creditors gave you more or less value than you were entitled to receive. Moreover, the Bankruptcy Court was told that Barclays Capital was to receive $47.4 billion (not $49.7 billion) in securities and to pay $45.5 billion (not $45 or $45.2 billion) in cash. We are both duty-bound to ensure that LBI received  the value it was supposed to receive in exchange for your $45 billion. We have  offered several times to do this accounting with you (and, as appropriate, the Fed), and it is ntirely possible that the SIPA Trustee and the Bankruptcy Court would  want such an accounting, but your personnel have declined, citing the amount of time and effort it would take. We should do this accounting and should do it now...

A different way to explain what was happening is provided by the transcript of Kirk's confidential deposition in court, also made public:

. . . [A]s I understood it from the way that Mike Keegan explained it to me was that the Fed had been providing a repo for Lehman Brothers earlier in the week of approximately $50 billion, that the Fed had made it known that they wanted to be repaid on that repo, and that Barclays had agreed to assume that repo obligation from the Fed. Without that financing the firm would have collapsed the next morning. So the way it was explained to me was, during the transfer of those -- that loan and the collateral associated with that loan, there were many pieces of collateral that Barclays could not value, so they did not accept them in transfer from the Fed. And mechanically, it was explained to me the way that worked was, in a tri-party repo, the Fed transferred all of the positions to JPMorgan and then JPMorgan began transferring those positions upon the receipt of money from Barclays transferred money, and then they would transfer the positions that secured that repo. And at some point during that process, Barclays became very uncertain as to some percentage of that collateral, I don't recall the exact amount, but it was a large number, maybe as much as, you know, 20 percent of the collateral, and when Barclays didn't accept those positions, they, by definition, just got left at JPMorgan. They -- so JPMorgan was left with collateral that they were not comfortable with but Barclays would not accept, so -- and JPMorgan, I guess they attempted to negotiate but couldn't get that negotiation done.").

Barclays' attempt to nickel and dime JPM (and the US taxpayers) so infuriated Jamie Dimon that he penned an angry letter to John Varley, Barclays Group CEO (which CC:ed Barclays' president Bob Diamond), threatening with litigation in case Barclays is intent on sticking JPM with Lehman collateral that it thought was without value and not worth assuming in a time when every single day stock prices were crashing further lower.

A very telling excerpt from the note is the following description of what was happening the Thursday evening after Lehman had filed:

Chaos reigned throughout Thursday evening. You sent another $40 billion in cash. Billions of dollars of securities were sent out and many were "DK'd" or otherwise sent back. By about 11 o'clock, when DTC shut down, you had apparently received a net total of approximately $42.7 billion of securities. All of the confusion was heightened by the absence of any definitive list of securities you were purchasing - an absence that we believe further supports the notion that you were taking all of the securities collateralizing our intraday advances.

Basically, Barclays tried to rip JPMorgan off by collecting not just on the Lehman collateral which was part of the Barclays APA, but pretty much all the collateral in the tri-party repo, backed and funded by the NY Fed and JPMorgan. But the bottom line is that chaos ruled: tens of billions of dollars were flying on the wires at any given minute, in order to give the impression that with Lehman's collateral now on Barclays' books everything was magically better.

In this firestorm of wire transfers, the Fed's direct Lehman exposure was made obvious. From the Jamie Dimon letter, one can see that in the days after Lehman's bankruptcy, over $50 billion in securities had been assumed by the Fed via FRB and DTCC programs, which also included anywhere between $3 billion and $4.5 billion in equities. It was Barclays' onus to shift this entire collateral exposure to its own balance sheet (while paying both the Fed and JPM off).

Another way of representing this activity immediate to the $40 billion transfer highlighted by Dimon above, comes from the following table, showing the insane activity on the wires between the Fed, the Tri-Party repo, and other parties. Indicative of just how precarious the system was, is the over $6.2 billion in DK'd transactions (a staggering amount), which meant that the fate of the successful closure of the Lehman deal (and the September 19th near collapse of the Reserve money market fund) constantly hung on by a thread.

An amusing tidbit highlighting the manner in which Barclays was attempting to game the system, is that even as it was unwilling to assume much of the collateral that the Fed had accepted earlier (as we pointed out, this includes equities, which as Karl Denninger reminds us, is allowed by Section 13.3 under "unusual and exigent circumstances"), and which is the main focal points of JPM's complaint to Barclays, what it did accept it promptly proceeded to mark up aggressively: none other than Jamie Dimon points out that very fact:

Indeed, much of the collateral financed by Barclays Capital on Wednesday night was the very collateral financed by the Fed on Monday and Tuesday nights. (For a very significant amount of that collateral, the movement of which between the Fed collateral pool and the Barclays Capital collateral pool was undoubtedly deliberate, Barclays Capital assigned a loan value greater than the amount that had been assigned by the Fed.)

The games banks play, highlighted by the very master of the game.

Another representation of what was happening to the collateral pool in the very critical Tri-Party agreement is the following table highlighting the variance between Lehman's haircuts on various assets (a nominal 4% weighted average) and that demanded by the Federal Reserve (9% weighted average). What is shocking is the eagerness by the Fed to lend against equities after a mere 20% haircut in principal value. This begs the question, just how much of the collateral pool in the Fed's discount window is even covered at all, assuming extensive loans from the time of Lehman's collapse are likely significantly underwater not only in terms of equity collateral, but for non-IG corporates, converts, and private labels, all of which had the same blanket haircut. The chart below shows that on the Friday before Lehman's collapse, the Fed was willing to accept virtually any toxic asset into its own balance sheet, after applying a generic 20% discount.

And if you have ever wondered just how a hundred billion dollar + organization has a valuation set (almost) literally on a napkin, here are the handwritten notes by Lehman's global financial controller Martin Kelly:



Yet what readers will likely have the most interest in is the following CUSIP by CUSIP representation of all the securities (equity and otherwise) that the Fed was responsible for as part of the Tri-party Repo Agreement, thereby pledging the goodwill of taxpayers' returns on such equities as bankrupt WHX, Tower Automotive, Federal Mogul, Intermet, Finlay Jewelers, and many other quality names. The full file can be found here. Below is a sample of the representative equities that the Fed was backstopping for Lehman in the days when it seemed like the entire financial system would collapse:

Coming full circle, the major question we have is what, if any, considerations did the Fed use when determining how much of Lehman's collateral pool it would be willing to onboard in the discount window. And if back then it was willing to accept securities of bankrupt companies as value pledges to US taxpayers, why would one assume that anything has changed? The next time there is a "risk-flaring" event (and with bankrupt companies presumably still on the Fed's balance sheet, it is merely a matter of time), how much more leeway will be given to toxic assets? Will the Fed now allow for a 10% haircut instead of 20%? Or how about 5%? Or maybe it will actually say the securities deserve a premium, since all that money Bernanke is printing has to go somewhere. We hope that the over 300 members of Congress who already support Ron Paul's "Audit the Fed" Initiative consider the implications of what the Lehman fiasco has taught us, and how this unique look into the Fed's balance sheet should be a very critical reminder of just how much risk the Fed is willing to take on with taxpayer capital when bailing out a financial system that, absent ongoing accounting gimmickry and endless Reserve Banking System subsidies, is still rotten to its core.


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Sat, 10/17/2009 - 15:48 | 102160 Anonymous
Anonymous's picture

Penson's Letter To SEC On Matt Taibbi
By Kerry Massaro
Oct 7, 2009 at 04:29 PM ET

Check out this developing story on Penson Financial Services, which was accused of a serious securities law violation (approving a large naked short) by Rolling Stone columnist Matt Taibbi. Penson wrote a letter to the SEC denying any wrong doing.

Here is a story that appeared in The Business Insider that recounts what happened.

Sun, 10/18/2009 - 10:40 | 102623 Anonymous
Anonymous's picture

This is a huge profit center for brokerages and clearing firms.
Nothing will be done about it.

Sat, 10/17/2009 - 15:49 | 102162 AN0NYM0US
AN0NYM0US's picture

anniversary of the 1987 crash

Wall Street Week with Louis Rukeyser

Sat, 10/17/2009 - 17:23 | 102232 Anonymous
Anonymous's picture

I do miss louis in a freakish kind of way.

Sat, 10/17/2009 - 15:57 | 102173 Danz Gambit
Danz Gambit's picture

Great work ZH

You should buy NBC, get your research out to a larger audience.

Sat, 10/17/2009 - 16:33 | 102210 AN0NYM0US
AN0NYM0US's picture

au contraire - I suspect that if measured properly ZH would have not only a better quality audience than (C)/(MS)NBS but a larger one

Sat, 10/17/2009 - 17:21 | 102230 Anonymous
Anonymous's picture

Yeah it is, what strikes me as particularly fascinating is the entire hindsight concept. Now that the collateral is recognized as having value, the lawsuit has merit to it and is of course being pursued. Interestingly Barclays could point out that even JPM's Dimon himself perceived these items to have no value and acted aggressively to get the items off of his books when stuck with them.

Perhaps that really indicates that for a moment in time the vulnerability of banks to not support the market and leverage extensions to have been divorced from reality. It seems more and more that we're nearing that now price/value is being stretched too far, but at least we know there is a floor below a-la the USG.

Sun, 10/18/2009 - 12:37 | 102680 Anonymous
Anonymous's picture

CNBC needs to send its reporters to ZH headquarters to be retrain. This is real financial journalism!!

Sat, 10/17/2009 - 15:59 | 102174 Thomas
Thomas's picture

Just testin' my new login. Deeper comments forthcoming (maybe). Good to see that login demands 3rd grade math.

Sat, 10/17/2009 - 16:06 | 102187 sgt_doom
sgt_doom's picture

Geez Louise!  Am I the only one getting those tensor calculus probs?

Great catch/blog, TD!!!!!!!

Sat, 10/17/2009 - 17:31 | 102233 Thomas
Thomas's picture

Hint: Use Bessel functions.

Sat, 10/17/2009 - 15:59 | 102177 Stevm30
Stevm30's picture

Great stuff - thanks.

Sat, 10/17/2009 - 16:05 | 102186 You Cant Handle...
You Cant Handle the Truth's picture

I, for one, support the "corporate death penalty" for this kind of crap.  

Fines are meaningless.  Putting a few people in jail is meaningless.

Liquidate a corporation when they commit severe crimes and you can bet it won't be business as usual anymore for management.

Sat, 10/17/2009 - 17:23 | 102231 Anonymous
Anonymous's picture

AMEN Brotha!!

WHY are Americans not taking to the streets en masse to protest this continual theft, aided and abbetted by our own GOVERNMENT??

As someone said earlier--- The BANKS are our Government.

Obama--WHAT HAPPENED to your promises of accountability and transparency?? I voted for you, and feel like your election was the biggest bait and switch swindle of all time.

Meet the new boss - Same as the old Boss --OWNED by the BANKS.

Sat, 10/17/2009 - 19:05 | 102285 Anonymous
Anonymous's picture

Obama--WHAT HAPPENED to your promises of accountability and transparency?

You didn't really believe his happy-face hopey changey bullsh1t did you?

Sat, 10/17/2009 - 23:05 | 102449 Anonymous
Anonymous's picture

it boggles the mind until recall the immortal
words of p t barnum....

Sun, 10/18/2009 - 00:20 | 102506 Anonymous
Anonymous's picture

Jessica Simpson would have been a better option than the McSenile/Palin ticket...
Give us a fucking BREAK!

Sun, 10/18/2009 - 06:51 | 102560 Miles Kendig
Miles Kendig's picture

There wasn't supposed to be a better option.  Didn't you get the memo?

Sun, 10/18/2009 - 12:41 | 102681 Cognitive Dissonance
Cognitive Dissonance's picture

Sadly, people still cling to the notion that we in the US have free elections, that the candidates make it to "the show" strictly on their own merit and the ballots cast are actually counted fairly.

Sun, 10/18/2009 - 12:20 | 102669 torabora
torabora's picture

BarriO is from Chicago. It's all about the game. Anyone who voted for him believing him to be a populist is a fool. This is the genesis of American facism....crony capitalism meets Socialism.

Sun, 10/18/2009 - 13:00 | 102691 Anonymous
Anonymous's picture

No, the genesis of this started with 9/11. The powers that be used that event to setup all of the security/anti-constituional related laws needed for an efficient corporatist tyranny. Then they crashed the economy to pave the way for the next President to continue with the ball and usher in the economic changes necessary. A clean two sets of targeted events and Presidents set to use them setup by the folks who will run the show for the next hundred years.

Sun, 10/18/2009 - 20:20 | 102960 dot_bust
dot_bust's picture

I can tell you why Americans aren't taking to the streets. They're retarded. Have you ever tried explaining yourself to a roach? There's your answer. The average American is still driving around in a gas guzzling SUV with American flags taped to the windshield. They view the plastic flags as patriotism. They'll never learn.

Sat, 10/17/2009 - 17:38 | 102238 buzzsaw99
buzzsaw99's picture

More than corporations are in need of killing imo.

Sun, 10/18/2009 - 19:59 | 102944 ToNYC
ToNYC's picture

Corporate execution for crimes against people. Capitalism Punishment. Capitalism good; corporate criminality bad. Free Markets for Free People. Government fixes markets 'till they break. Regulated entities must be disqualified from Regulation construction. The fox shouldn't provide input on building the chicken coop.

People make the rules; corporations take a back seat or Serfdom is the only road to the Hell of our own acquiescence.

Sat, 10/17/2009 - 16:16 | 102194 Anonymous
Anonymous's picture

Look on the bright side. At least refutes the accusation that the foreign buyers always get burned in these gonzo Wall Street mega-collapses/rescues.

Sat, 10/17/2009 - 16:26 | 102201 john_connor
john_connor's picture

Cheers TD.  Always enjoy your work.

Judgment day for the Fed approaches...

Sat, 10/17/2009 - 16:32 | 102209 Anonymous
Anonymous's picture

I read a story slanted from the Barclay's viewpoint not long ago that made JPMorgan look like the villian (trying to wire all kinds of crap to Barclays which Barclays claimed wasn't per the deal). With this view, I really don't know who exactly is the villian. Either way, all the surviving banks have made out well off our taxpayer backs, and are now paying themselves massive bonuses. They are all thiefs, villians, pigs in my view.

Sat, 10/17/2009 - 16:44 | 102215 Michael
Michael's picture

The trillions of tax payer money was spent to maintain the world power structure of the wealthy elite. Surely it would have collapsed by now if they didn’t. It’s still going to collapse. We are not so stupid that we can’t understand this.

Sun, 10/18/2009 - 12:46 | 102682 Cognitive Dissonance
Cognitive Dissonance's picture


We do understand this. But we aren't important for the Poniz to continue because we are the minority. While the sheeple majority are getting suspicious and restless, another stock market crash will frighten then into submission.

Sat, 10/17/2009 - 16:44 | 102216 Anonymous
Anonymous's picture

"...just how much risk the Fed is willing to take on with taxpayer capital when bailing out a financial system that, absent ongoing accounting gimmickry and endless Reserve Banking System subsidies, is still rotten to its core"


Sat, 10/17/2009 - 22:01 | 102414 TumblingDice
TumblingDice's picture

and the thing is, this statement could really be written at any time in the past five decades and it would still be pertinent and true.

Sun, 10/18/2009 - 06:55 | 102561 Miles Kendig
Miles Kendig's picture

That's the ticket for sure Dice

Sat, 10/17/2009 - 16:50 | 102218 Anonymous
Anonymous's picture

Just wow.

Let these names be burned in our memories: Ian Lowitt, Skip McGee, Ajay Nagpal, Tom Humphrey, Eric Felder, Gerald Donini, Mike Gelband and Hyung Lee.

Hope you got yourselves a good deal, assholes. Enjoy your country club memberships and Ukrainian call girls while you can, you fucks. Even if the regulators conveniently forget, Google never, ever will.

Sat, 10/17/2009 - 17:18 | 102228 Anonymous
Anonymous's picture

What a read!

Fantastic view of the battle in the trenches in the midst of a crisis!

Bravo to JP Morgan!

Nice try Barclays, way to take a tragedy and see it as an opportunity to pull out all the stops and ironically "go for broke".

As for the Fed, well, they're not the Justice Dept., and they're not that different from the IMF, an organization that bails-out entire countries due to greed and corruption on a regular basis.

The only difference here is that there is an outside chance that Barclays may actually be held accountable -though I wouldn't count on it.

I enjoyed reading this as much as the cliff notes of a Tom Clancy novel.

Life is more compelling than fiction.

Sun, 10/18/2009 - 15:32 | 102791 Miles Kendig
Miles Kendig's picture

Excellent indeed.

Just imagine what would happen if the US had to implement the kinds of austerity measures countries receiving IMF money have to.  Rough comparison would be a 30% reduction in the budget, social security, disabled veteran pensions & benefits, across the board reductions in salaries and every department of government.  If America had to suffer in this respect due to the actions of its oligarchs more folks would understand what is actually happening, what is at stake and the real costs associated with all these trillions.

Sun, 10/18/2009 - 22:51 | 103052 bilbert
bilbert's picture


Being the reserve world currency, means never having to say you're sorry.....

Sat, 10/17/2009 - 17:33 | 102235 Anonymous
Anonymous's picture

Have you ever been to tropical fruit market on a hot summer day? The stuff is deterioting and prices are falling...

So, all the assets are deterioting like ...

Sat, 10/17/2009 - 20:16 | 102345 deadhead
deadhead's picture

I was thinking the restrooms at LaGuardia.

Sat, 10/17/2009 - 20:28 | 102355 Miles Kendig
Miles Kendig's picture

There is an especially germaine lyric from a clown rap group that works well.  I'll spare you the link unless you want it, but here is an applicable line.

Peel back the rind and examine the fruit
Rotten to the core buried in they best suits
Maggots crawling on they face,
Eyes sunk in they head
Throw your fuckin arms up and rock the dead - Twiztid

Sun, 10/18/2009 - 11:25 | 102640 FreddyInBangkok
FreddyInBangkok's picture

i defy you take a slash at Dacca airport

Sun, 10/18/2009 - 17:13 | 102821 halvord
halvord's picture

And they started out smelling like durian in the first place.

Sat, 10/17/2009 - 17:43 | 102245 deadhead
deadhead's picture

At this point in time, I think it would be appropriate to use taxpayer funds to purchase top of the line sunglasses for geithner, summers, bernanke, ad infinitum, because the sunlight is getting very bright.  starting to sting the eyes.  starting to smell really bad to.

Big ovation to ZH (once again) for letting the sunshine come in.


ps...larry g. mcdonald, what do you think about this?

Sat, 10/17/2009 - 17:51 | 102248 Miles Kendig
Miles Kendig's picture

Once again excellent weekend read ZH.  Thanks for the analysis and sourcing.

Sat, 10/17/2009 - 17:52 | 102249 Michael
Michael's picture

I plan on moving my credit card debt off my balance sheet soon. It will improve my cash flow and make the capitol requirements for my other expenses more easy to manage. I do plan on reimbursing my creditors though, in 10 or 20 years.

Sat, 10/17/2009 - 17:59 | 102251 Bit Bucket
Bit Bucket's picture

I think that this video is more appropriate.

Sat, 10/17/2009 - 22:54 | 102442 MsCreant
MsCreant's picture


"We are in some hellified shit if Kansas is fukced up!"

Sat, 10/17/2009 - 18:03 | 102254 Anonymous
Anonymous's picture


Burning and looting of the Treasury by bankster PRIVATE corporations has never been more apparent. Keep it up banksters -you'll learn what burning and looting are all about the hard way.

You will NOT gamble with MY money ANY longer!!!!


Sat, 10/17/2009 - 18:04 | 102256 monopoly
monopoly's picture

It just goes on and on with no end in sight. Will we ever see the end of the fraud, deceit and greed that is part and parcel of Wall Street. I am afraid as long as we have the same corrupt govt. system in place the truth will be covered up. it is all about getting re-elected.

Term limits anyone.

First post for a newbie.

Glad I know 3rd grade math. :)


Sun, 10/18/2009 - 07:13 | 102565 Miles Kendig
Miles Kendig's picture

Welcome aboard mono poly.  We look forward to getting to know you and your friends you bring along.  Term limits are a joke since the system is what it is.  It is said in many places one term as county sheriff would set ya up for life.

The getting reelected part is just a game to keep politicians in check and get another person inside their life.

Sat, 10/17/2009 - 18:22 | 102266 jm
jm's picture

This is fascinating.  I'm not a lawyer, and I apologize in advance if these are ridiculous questions. 

Start with the incomprehensible chicken scratch valuation of Lehman, the incoherent complexity of the repo structure, and the inability to mark-to-market collateral...

Would it really be possible to un-net/unwind all positions and accurately value a reverse repo book like Lehman's through a court-administered bankruptcy process, even given years?

My thought is that current statues and courts could not handle this, especially with counterparties that could refuse to settle their obligations to a bankrupt entity. 

Wasn't the motivation to move the business book to another entity for settlement purposes?

Thanks.  This really is an awesome piece of work.  


Sat, 10/17/2009 - 19:35 | 102312 Hansel
Hansel's picture

To me, the only way we will know if it's possible to unwind this mess is if we actually start.  I'm sick of hearing that it's so complex that we shouldn't even try.

Sat, 10/17/2009 - 20:30 | 102357 Miles Kendig
Miles Kendig's picture

When the only fear to be offered is the fear of making the attempt we should realize that the only thing to fear are those with the fear.

Sat, 10/17/2009 - 21:00 | 102382 deadhead
deadhead's picture

well said miles.

i read "1776" some time ago and thought of those soldiers and their families who fought to found this country.  the incredible hell that they perservered through blew my mind; the conditions were unimaginable, yet they did it. the American people would have to put up with much less worse to change today's paradigm.   

Sat, 10/17/2009 - 21:13 | 102388 Miles Kendig
Miles Kendig's picture

DH - We have some of the family diaries from 1635 in Mass Bay all the way through..  Amazing reads.

When we realize what others have done.  The ordinary becoming extraordinary as circumstances called.  As MsCreant said, we just happen to have been of an age when circumstances and events converge to call on all of us.  The one thing I have come to understand is that the emergence will be much more of a challenge than the turning will be. 

Here is to helping America and by extension the world stand.

Sun, 10/18/2009 - 15:19 | 102781 Howard_Beale
Howard_Beale's picture


Sat, 10/17/2009 - 20:49 | 102377 jm
jm's picture

You're missing my point.  I'm not in favor of bailing out anyone/giving the Fed balance sheet the clap/socializing the economy/sodomizing taxpayers.  The sun will come up with or without Wall Street.

I'm just trying to think through why they engaged in such a clusterfuck in lieu of more straightforward courses of action, and thinking ahead with respect to the next phase of the game. 


Sat, 10/17/2009 - 21:03 | 102384 Miles Kendig
Miles Kendig's picture

and thinking ahead with respect to the next phase of the game.

Indeed, the nature of objective circumstances requires that we do so.  Thank you for this effort and I hope you provide more considered opinion to come.  Agree with elements or not, that picture needs to be drawn.

Sat, 10/17/2009 - 21:07 | 102385 deadhead
deadhead's picture

I'm just trying to think through why they engaged in such a clusterfuck in lieu of more straightforward courses of action, and thinking ahead with respect to the next phase of the game

JM...for great answers take a read of Lawrence G. McDonald's "A Collosal Failure of Common Sense" about the Lehman implosion. You'll find many answers there.

also, House of Cards by William Cohan in re Bear Stearns. That one is timely now given the Cioffi and Tannin of Bear have their trial in progress at this writing.

The McDonald book is the better read in my view.

Sat, 10/17/2009 - 21:56 | 102411 Hansel
Hansel's picture

I didn't miss your point.

Sat, 10/17/2009 - 18:22 | 102267 Michael
Michael's picture

Obama Poised to Cede US Sovereignty


Sun, 10/18/2009 - 11:17 | 102637 FreddyInBangkok
FreddyInBangkok's picture

to Nigeria

Sat, 10/17/2009 - 18:43 | 102275 Anonymous
Anonymous's picture

I think unusual and exigent circumstances will be around for 5-10 more years. Until everyone forgets about our Discount Window funny business..
So our taking IOU's on the back of napkins is legal.
Just ask squid junior: JPM.

Sat, 10/17/2009 - 22:40 | 102413 TumblingDice
TumblingDice's picture

GS may be the squid but JPM is nobody's junior. I would describe them more as the colossal tapeworm in the worlds stomach...they are a different kind of parasite.

Sun, 10/18/2009 - 21:44 | 103010 MsCreant
MsCreant's picture

Good metaphor.

Sat, 10/17/2009 - 18:44 | 102276 whoopsing
whoopsing's picture

Definition- Kelly note: An all encompassing,totally illegible,off the cuff valuation designed to enrich your future boss,dismiss yourself from the trainwreck created of your past obligation's,obfuscating any plausable culpability.All the while dodging piece's of the structure you helped to create as it all fall's down around you,and you get a nice pay package and bonus to boot

Sat, 10/17/2009 - 18:55 | 102281 SilverIsKing
SilverIsKing's picture

What is the world coming to?|main|dl1|link3|


Sat, 10/17/2009 - 19:09 | 102288 FischerBlack
FischerBlack's picture

OMFG, you gotta love how Martin Kelly just throws around billions upon billions of dollars (taxpayer-backed) without even writing out the goddamned zeroes. 42, uh, let's see, carry the one, that's 70, uh, minus fees, let's see, that's 68, <draws circle>, there we go, its official, 68 is the number, guys, no consideration. Let's do this.

Incredible, scandalous stuff.



Sat, 10/17/2009 - 19:16 | 102292 lizzy36
lizzy36's picture

i can't help but think how much the feds crappy balance sheet benefits from the indices continuing to defy gravity (on odd lots no less). 

nice work, tyler.

Sat, 10/17/2009 - 19:29 | 102307 Miyagi_san
Miyagi_san's picture

Now overlap Geitners phone calls on the days in question and the NY Fed will stink of foul discharge

Sat, 10/17/2009 - 20:31 | 102360 Yankee
Yankee's picture

Fortunately it is Saturday night, Halloween will be on Saturday also.

Sat, 10/17/2009 - 20:32 | 102363 albion402
albion402's picture

Someone is a crook in this deal. Where are the cops?

Sat, 10/17/2009 - 20:42 | 102373 Careless Whisper
Careless Whisper's picture

Love that back-of-the-napkin analysis done on exhibit 198. "building 1.0" I guess that would be their skyscraper world HQ in Manhattan. Do all the bankstas just round to the nearest billion now?!

Sat, 10/17/2009 - 20:59 | 102381 Anonymous
Anonymous's picture

Uh, yeah. I know the building well, as well as the NY property market. The "round number" value was 1.0...billion.

Sat, 10/17/2009 - 21:33 | 102400 Zombie Investor
Zombie Investor's picture

Oh, what a surprise.

"Industry warns of consequences of dark pool reform

Sweeping rule changes meant to shed light on so-called dark pools, where stock-trading is done anonymously, could ultimately hurt the traditional investors that regulators are trying to empower, trading executives warned over the past few days."

Sat, 10/17/2009 - 22:33 | 102432 deadhead
deadhead's picture

saw that earlier, people should read it.

I can only imagine that reforming dark pools will result in the immediate death of the USA and cessation of organic life on earth. maybe we should just let 'em continue with that and HFT/flashies as well.  Otherwise, we all die.

Sat, 10/17/2009 - 22:35 | 102433 Anonymous
Anonymous's picture

The Fed can take infinite losses. Or more properly they can ignore ignore infinite losses. This is the foundation of the system now. When the risk returned from outer space and became losses the Fed put them into a black hole in its basement. It's the ultimate Emperors Fine Clothes exercise. The only other option to declaring the Feds clothes beautiful is death.

For 40 years we were told in essence if the Fed had only monetized the debt of the trusts and all manner of over leveraged corporations, in 29 50% of all debt was corporate, then the depression would have been avoided. So now the Fed is doing just that to wild applause. Nobody, nobody is going to call them on it. We can sit here in the peanut gallery and moan, don't mean a thing.

It should be noted that Milt's sacred theory now being implemented worked on with and for only corporate assets. Only corporations. Citizens don't have a fucking thing to do with it. Milt was a smart man and very talented. He convinced millions of citizens he was on their side.

Sun, 10/18/2009 - 05:24 | 102548 jm
jm's picture

The Fed can take infinite losses.


God puts a loss limit in the casino.  The Fed hasn't bumped it yet, but CDS spreads earlier this year came over and gave Uncle Sam a quiet warning.

So deep in losses, and those asian girls keep bringing the complimentary booze. 

Ben's a beautiful gambler with other people's money.  Or he's just another idiot that pukes all over the floor.

Sun, 10/18/2009 - 10:19 | 102614 deadhead
deadhead's picture

well spoken jm!

Sat, 10/17/2009 - 22:47 | 102439 Joe Sixpack
Joe Sixpack's picture
Proclamation on the Federal Reserve System of the United States of America March 2008

WHEREAS, Article I, Section 8 of the Constitution of the United States of America authorizes Congress "To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures";

WHEREAS, on December 23rd, 1913 the US Congress enacted the Federal Reserve System;

WHEREAS, the Federal Reserve System is considered an independent agency within the federal government, with oversight of Congress and containing appointed public officials on its board of directors;

WHEREAS, the Federal Reserve System Controls the Federal Reserve Note, the official currency of the great nation of the United States of America;

WHEREAS, there may be controversies regarding the legality and constitutionality of the Federal Reserve System, it is recognized that the said system has operated continuously as the central banking system of the United States since the inception of the Federal Reserve Act of 1913;

WHEREAS, the Constitution of the United States of America granted Congress the authority to create the current Federal Reserve System, it also does grant Congress the authority to modify or revoke the Federal Reserve System;

WHEREAS, the actions of the Fedreral Reserve System represent the credit and currency of the United Stated of America to the citizens of this great nation and to the world;

WHEREAS, the Federal Reserve System, acting independently within the federal government allowed, supported, and even promoted parasitical and non-productive uses of the money and credit of the United States of America;

WHEREAS, the United States and likely the entire world's financial system is undergoing massive de-leveraging of the said parasitical and non-productive uses of the credit and money of the United States of America (as well as other nations' currencies);

WHEREAS, the US dollar, the "Federal Reserve Note" is declining in value due to these parasitical activites, as well as potentially other causes;

WHEREAS, it is recognized that the citizens of the United States and other nations did willingly participate at some level in the creation and propogation of said parasitical activities;

WHEREAS, it is also recognized that the United States of America, a sovereign nation, has the legal, moral, and God given authority to take actions to benefit its citizens and to protect its good name, credit and money in times of difficulty;

WHEREAS, it is recognized that the current time is such a time of great difficulty;

WHEREAS, it is recognized the parasitical financial institutions and their activities are at odds with citizens of the United States of America and the good credit and money thereof;

WHEREAS, the current indications are that the Federal Reserve System is acting to preserve the financial system currently flooded with the parasitical activities;

WHEREAS, the current indications are that the neither the Federal Reserve System, nor the Congress of the United States, nor the people of the United States have access to the books of the institutions being preserved by the Federal Reserve, and therefor the degree of inter-connectivity and risk associated with the institutions and other entities cannot be determined;

WHEREAS, the Federal Reserve System is accepting non-performing assets as collateral for credit with ultimate taxpayer responibility to entities not under its legislative mandate;

IT MUST BE CONCLUDED, that the Federal Reserve System is not acting to the benefit of the people of the United States of America, its credit, money, and good name;

WHEREAS, it is recognized that the political will and capability of the government of the United States of America may not be up to the task of prosecuting this proclamation ; It is also recognized that this may be the only hope for the continued survival of the United States of America as the great nation as it has historically existed.

NOW THEREFORE, it is PROCLAIMED by those supporting this Proclamation that the Congress of the United States of America FULLY NATIONALIZE the Federal Reserve System, and take full control of the credit and money of our great nation; The Congress must take whatever action necessary to seperate out, sequester, disown, or otherwise neutralize the effect of the parasitical financial activities which led to the current crisis; The Congress of the United States of America must reorganize, replace, or terminate the Federal Reserve System as appropriate; or otherwise devise a system for creation of the national currency.

IT IS FURTHER PROCLAIMED, that the Congress of the United States of America in cooperation with the Executive of the United States of America contact allied nations and any other nation willing to participate in the overhaul of the failing and parastical financial sytem currently in operation and create new treaties and alliances as necessary to create a sane and productive system of finance with the express goal of supporting a productive national, and by extension and through voluntary cooperation, world economy;

FURTHERMORE, it is PROCLAIMED that it should be the goal of such an international effort to maintain fair international trading practices allowing for protection in national interest of labor, resources, and productive capabilities;

WHEREAS, it is recognized that such a move on the part of the United States of America may result in the necessity of an isolationist policy IF the other developed nations do not follow our lead; If such occurs, so be it.


Sat, 10/17/2009 - 23:12 | 102450 Michael
Michael's picture


Michael J. Hancock.

Sun, 10/18/2009 - 20:09 | 102952 ToNYC
ToNYC's picture

The Mother of All Blowbacks. The house of cards fell on Sept 15th, 2008 and since then the TBTF gang has been stealing all the cards and chips promising another game when the dust clears...When the dust clears they'll be solid gone! We'll be left with starting fresh and all our seed corn and rebuild options like loaning to jobless to start small businesses and services without corporate management was stolen under the T.A.R.P.

Sat, 10/17/2009 - 23:19 | 102455 Crab Cake
Crab Cake's picture

I've got a song for you Benny Boy.  It won't be long now....

Castles Made of Sand- jimi hendrix

Sat, 10/17/2009 - 23:59 | 102488 Anonymous
Anonymous's picture

given all of this financial rectitude i fail to understand why the fed recoils at an would be the perfect opportunity for it show off its immaculate accounting, financial circumspection, and fiduciary exactitude....

it's a pitty that a textbook example of economic purity has to be concealed from the unwashed masses....

Sun, 10/18/2009 - 01:08 | 102536 Anonymous
Anonymous's picture

It started in 1992 with the banksters:

Sun, 10/18/2009 - 01:23 | 102542 Anonymous
Sun, 10/18/2009 - 16:47 | 102809 Careless Whisper
Careless Whisper's picture

buggery. watched the whole series. thanks.

Sun, 10/18/2009 - 08:58 | 102593 Anonymous
Anonymous's picture

Pity Nomura didn't get the same, royal treatment. They've been having to take quite a few hits on their Lehman purchase. Poor things got the place cherry picked over.

Sun, 10/18/2009 - 10:02 | 102606 Anonymous
Anonymous's picture

I wonder how many people here can answer a simple true or false question:

The Fed is already audited, annually, in accordance with U.S. GAAP.

True or false?

Just asking.

Sun, 10/18/2009 - 10:35 | 102608 AN0NYM0US
AN0NYM0US's picture
Who is Carlos Slim?

by Simon Johnson


"First, obviously nothing can stop Goldman Sachs and JP Morgan.  With unfettered access to the Federal Reserve and no effective controls on their ability to take risk, they are in the catbird seat.  The weakness of other big banks is further icing on their cake.  GS and JPM are symbols will loom large over the national and international economy for a long time to come, with the main threat (to them) coming from their rather too blatant market share in many products.

Second, the surviving big hedge funds will do very well (partial list).  They can move fast, they have no regard for anything other than profit, and they will not be effectively regulated...


...But we are entering a new, more global era of state capture, and the US government (or, more precisely, its credit) was handed over – rather meekly – during the past 12 months.

Many states have been taken over by bankers; there is no shame in fighting and losing against what Jefferson called the “monied aristocracy.” But few governments, even the weakest, have handed over the keys as quietly as we did."

Sun, 10/18/2009 - 11:19 | 102638 Miles Kendig
Miles Kendig's picture

With so many people writing about this and other related issues it will be impossible for someone in power to say they didn't know what was happening with any credibility.

Sun, 10/18/2009 - 11:26 | 102642 Anonymous
Anonymous's picture

The banksters started it back in 1992:

Sun, 10/18/2009 - 12:29 | 102675 Anonymous
Anonymous's picture

Anyone know if the FED will responsible for the PREFERENCE in this bankruptcy? Still not sure they should have recouped their loans prior to everyone else...afterall....they did collect collateral/ They should have gotten in line like everyone else.

Sun, 10/18/2009 - 14:01 | 102732 torabora
torabora's picture

Who expected Barclays Bank to behave any different? Did you expect them to cut the WORST deal possible for themselves? I've always been taught that BK is economic fertilizer. If BK includes poisoning the new owner of a dead company's assets with toxic assets then deals off! If a dead companies toxic assets have to be eaten by the living then they won't. That will mean 100% of a BK firms assets get looted and ALL of the liabilities are lost to the creditors. This will incentivise bankruptcy. It will be possible to 'engineer' huge BK's much as the leveraged buy-outs rolled companies with weak balance sheets in the past. Imagine this scenario....plant insider in a bank to 'loan' banks money to a 'firm'. The 'firms' never had a snowballs chance of making it but it was 'just a bad business plan'. Firm goes bust and takes bank down with it. If outsiders aren't able to vultch on the remnants then the folks that took the bad loans walk.

In Susanville Ca., fella took a loan of $1.4 million to improve the city owned golf course he leased for $0/yr. He paid the bank interest only for a couple years. He paid himself and his family to run the golf course. Then he walked on the whole deal when the loan money had been spent. The bank ate the loan and got TARP money soon after. The city paid the bank a few hundred thou too. The bank lost about $1million$. The dead beat never got sued even though he owns lots of property in the County.


I betcha this is done all over the country.

Sun, 10/18/2009 - 15:03 | 102773 Anonymous
Anonymous's picture

As the old hippie St. Ambrose said:
"When in Rome, make like a Roman".

Good effort, Barclays.

Sun, 10/18/2009 - 15:08 | 102775 theprofromdover
theprofromdover's picture

'Interesting times'

I presume the GS, JPM, Barclays' of this world see themselves as pretty cool gangstas.

They may have the legislature and mainstream media in their pocket, and think they can re-write the rules as they see fit. Unfortunately for them, their idea of organised crime is prep-school level.

They better pray that the people eventually wake up (some hope!) and dispose of them in a civil manner, cos if not -

when the real organised crime starts leaning on them for a slice of the cake, it will all get very ugly. Do you imagine for a minute that the real monsters intend merely standing by admiring Wall St's chutspa?

Sun, 10/18/2009 - 17:20 | 102829 Anonymous
Anonymous's picture


Great work following up on the recent disclosures in the Lehman Bankruptcy.
What is truly scandalous is that in the recent filings, much important information remains sealed, based upon what one can glean from the filed documents, available on the debtor's site via Epiq. The references below are to the Docket Entry numbers for the particular documents.

It seems that the Debtor Lehman filed a motion on 9/15/2009 (#5148) for disgorgement based upon discovery obtained after the Debtor moved for discovery in June. (#3596). The 9/15/2009 filing included volumes of discovery information, but in accordance with a standing confidentiality order, anything that Barclays deemed confidential was sealed, and much was sealed. Barclay's counsel which designated the confidential sections is Boies, Schiller & Flexner.

On 9/24/2009 the Debtor (#5271) and Unsecured Creditors (#5269) then moved to unseal the redacted material. The US Trustee filed a strong memorandum in support of openness. (#5416). The primary motion and the unsealing motions were to be heard on October 15, 2009. The day prior, the parties (but not US Trustee) entered into an partial unsealing stipulation #5481 and the original motion and exhibits were refiled with some redactions now eliminated. #5514, #5515 et seq. #5531-#5534.

Oddly, though, highly important information relating to the bonus disgorgement remains sealed - obviously facts highly embarrassing to Barclays since not only was the bonus liability apparently overestimated, but Barclays subsequently stiffed many ex-Lehman employees by not rewarding the full bonuses to which is seems to have committed itself in the court approved asset sale agreement of 9/15/2008. Barclays then required ex-Lehman employees it hired in September and then discharged in December to sign releases to receive the standard employee termination payments and the reduced bonus payment (10% to 20% of prior year bonus). See pp. 34 -#26 of the Debtor's Partially Unredacted Motion. #5514.

Most of the deposition of Paul Exall was redacted in the October "unsealing filing" including the prefatory portion of the deposition identifying who Paul Exall was. #5517. Thus in the Debtor's disgorgement motion itself, the following appears at 35-36:

"As it turned out, Barclays failed to pay the full $2 billion in "bonuses" to Transferred Employees as called for in the Asset Purchase Agreement. Barclays produced in discovery a spreadsheet purporting to show that in the aggregate, is has paid to transferred employees approximately REDACTED in compensation. ... While discovery has not yet been completed as to the underlying documentary support for Exall's spreadsheet, by Barclays admission the aggregate amount of bonuses paid to transferred employees appears to be no higher than REDACTED. (A. 137)."

Reading between the redactions, it appears that Barclays paid out even less to the Transferred Employees than the actual liability estimated in September, 2008 which itself was far lower than the amount reflected in the Asset Purchase Agreement.

Also, still sealed is the amounts of the total bonuses paid to the "transferred" Lehman executives who were "negotiating" the 2008 agreement on behalf of Lehman. p.10-12 of #5514. It is not known if the payments to these self-interested negotiators were part of the liabilities referred to as bonuses to Transferred Employees. If so, one could assume the possibilities of inflated bonuses to these "negotiators" taken out of the pocket of the loyal low-level employees who received as little as 10% of their prior year's bonus.

There is no proper basis for this bonus information being sealed - the US Trustee should object to the partial unsealing and press the court to unseal the information that remained sealed in the last minute stipulation of October, 14, 2009.

The docket sheet does not indicate what took place at the October 16, 2009 hearing - and there seems unfortunately to be no effort by the Court to expedite the transcript release process.


Sun, 10/18/2009 - 18:24 | 102871 Anonymous
Anonymous's picture

Great post.

Sun, 10/18/2009 - 20:12 | 102956 deadhead
deadhead's picture

Question: do you reporters reading this from the WSJ, B'berg (jonathan weil not included, he's great), NYT, CNBC, etc become ashamed because you are not digging in and exposing like Zerohedge on this and so many other issues?

I'm curious, seriously. In my 50+ yrs of life, my only sense of security in the usa governmental system has been the judiciary and an aggresive, investigative media.  Any comments from professional reporters?

Sun, 10/18/2009 - 20:57 | 102982 Jerome Lester H...
Jerome Lester Horwitz's picture

Cue cricket sounds...


Another awesome ZH article!!


ZH has become my MSM!

Sun, 10/18/2009 - 21:57 | 103016 Hansel
Hansel's picture

Related to your post, I read this article earlier today,

It is a report of Breitbart releasing the ACORN scandal tapes.  Breitbart says the MSM failed.  Then the author finishes the arcticle with this,

"Even if one accepts Mr. Breitbart's critique of the mainstream media, nobody should root for their downfall or destruction. Their role—that of impartial watchdog and broker of information—is a vital one, whether or not they perform it well."

So don't rag on the media, even if they suck at their job... says the WSJ apologist.

Sun, 10/18/2009 - 20:46 | 102975 Anonymous
Anonymous's picture

And, for your information, this is Lord Blankfiend. I was having trouble signing in before, which is why I posted annon. As you can see, I've been a regular here since the beginning. For you to ban me over this is unconscionable.

Sun, 10/18/2009 - 20:47 | 102977 Anonymous
Anonymous's picture

Opps, sorry. Vicelord. Not Lord Blankfiend (that's my handle on investors hub. I get 'em confused.) Why don't you do the right thing an UN-ban me. If you have ANY sense of fairness whatsoever.

Sun, 10/18/2009 - 21:35 | 103003 Anonymous
Anonymous's picture

Hey deadhead,

The media is too lazy to research...they're on deadline. Two or three shitty soundbites for a 90 second package and a reporter who has no understanding of the issues. Media is useless.

Sun, 10/18/2009 - 22:23 | 103044 deadhead
deadhead's picture

I hear you...I understand.  I would just like to know what some genuine journalists think of what is transpiring.

I can see what is happening....the blogs are providing the info and raising the questions that need to be answered.

on that note, now would be a good time for those with information that needs to come to the surface to contact tips at zerohedge dot com


Mon, 10/19/2009 - 09:56 | 103228 Anonymous
Anonymous's picture

This depends on what you mean by "genuine journalism". Journalism as practiced in the US is a for-profit enterprise. As such, "professional" journalists have no motivation to look for truth, only for the story that will entertain the highest number of their readers/listeners/viewers. I expect nothing from the MSM except what they consider entertainment. That is in their interests. Sadly, the majority of people, it appears, find that more entertaining than the truth which is documented on sites like ZH. Thank you all for doing this great service. It's appreciated. But then again, you are sponsored, too... hmm.

Sun, 10/18/2009 - 22:29 | 103045 Agent Orange
Agent Orange's picture

The Fed has put $700 billion in the system since March according to data on Non-borrowed excess reserves from the Fed's own web site. Can't wait to see what they bought for all that money.


Mon, 10/19/2009 - 06:47 | 103186 Anonymous
Anonymous's picture

Might be a good opportunity to the judge to use his powers to detain people for contempt. The judge can order the case reopened and subpoena all these people and when they show up take them to a holding cell in the basement while the court sorts it out. I believe the court can hold people for up to 6 or 12 mos on contempt. Not reviewable, no jury and no charges.

Mon, 10/19/2009 - 10:35 | 103278 You Cant Handle...
You Cant Handle the Truth's picture

Ladies and Gentlemen, the only thing that will take this country back for the people is a General Strike.  


If you want to get the attention of the leeches of society, you have to stop giving them your blood.


Workers Against a Kleptomaniac Economy Unite Peacefully


Tue, 10/20/2009 - 06:08 | 104196 Anonymous
Anonymous's picture

Revelation 18: When the kings of the earth who committed adultery with her and shared her luxury see the smoke of her burning, they will weep and mourn over her.Terrified at her torment,they will stand far off and cry:" 'Woe! Woe, O great city,O Babylon, city of power! In one hour your doom has come!'"They will say,'The fruit you longed for is gone from you. All your riches and splendor have vanished,never to be recovered.' The merchants who sold these things and gained their wealth from her will stand far off, terrified at her torment. They will weep and mourn and cry out: " 'Woe! Woe, O great city, dressed in fine linen, purple and scarlet,and glittering with gold, precious stones and pearls! In one hour such great wealth has been brought to ruin!'

Thu, 06/09/2011 - 16:56 | 1355677 sun1
sun1's picture

Its one of the good platform for awareness of people. Keep sharing such stuff in the future too. xbox 360 slim

Sun, 06/26/2011 - 21:14 | 1404252 sun
sun's picture

I found
lots of interesting information here. The post was professionally written and
I feel like the author has extensive knowledge in the subject. Keep it that


Thu, 06/30/2011 - 23:45 | 1417887 sun
sun's picture

This is very good blog and I also show you some imformation through this .

Austin SEO
Do NOT follow this link or you will be banned from the site!